Human resource management in US subsidiaries in Europe and Australia: centralisation or autonomy?

Abstract

We explore determinants of subsidiary autonomy in setting HRM practices within US parented MNEs, in Europe and Australia. We examine both the effect of strategic context, and the effect of the institutional location of the subsidiary. We find that US MNEs show greater centralization of control over HRM where the subsidiary faces global markets, in coordinated market economies versus liberal market economies, and where union density is low.Keywords: International HRM, subsidiary management, neo-institutional theory, strategic context, centralized control, multinationals 3 HRM IN US SUBSIDIARIES IN EUROPE AND AUSTRALIA: CENTRALIZATION OR AUTONOMY?Although an important source of competitive advantage for multinational enterprises (MNEs) may lie in their ability to deploy organizational and management capabilities worldwide, many MNEs have chosen, for strategic reasons, to concede considerable autonomy to their subsidiaries in designing their own management systems (Kostova and Roth, 2002;Noorderhaven and Harzing, 2003;Myloni et al., 2004). As Harzing (2000) has demonstrated, subsidiary autonomy in human resource management (HRM) is a feature of MNEs that are generally classified as multi-domestics; that is, MNEs whose subsidiaries have domestic mandates involving a local market scope accompanied by considerable latitude to engage in local product modification and local adaptation of marketing.On the other hand there are those, such as Birkinshaw and Hood (1998), who view subsidiary autonomy as not only determined by the relationship of the head office to its subsidiaries, but also by the nature of the local institutional environment in which the subsidiary operates. They argue that the nature of local legal conditions, the cultural environment, and the influence of the local authorities will all impinge on the degree to which subsidiaries have local control over their HRM systems.The aim of this paper is to combine these two perspectives by simultaneously examining the effects of the strategic role of the subsidiary and the institutional environment in which the subsidiary is located, in relation to the degree of centralization of control of HRM policies imposed by corporate headquarters. We examine the influence of the strategic role of the subsidiary in the sense of whether it has a purely local market orientation or whether it serves international markets. At the same time we investigate the impact of the environment in which the subsidiary is located by differentiating between the response of the MNE to the broad institutional setting at the level of national business systems (Whitley, 1992;Lane, 1992;Sorge, 1995;Foss, 1999;Hollingsworth, 2003;Redding, 2005) in which the subsidiary is located and, separately, the impact of labor unions on MNEs' ability to exert centralized control (e.g., Ortiz, 1998;Giardini et al., 2005;Singe and Croucher, 2005).We argue that US MNEs operate in relation to host country environments on the basis of both "economic rationality" and "normative rationality" (Oliver, 1997). ...

Measuring competing explanations of human resource management practices through the Cranet survey: Cultural versus institutional explanations

“…It is estimated as a function of institutional and cultural distance at the country level while controlling for a range of other factors at the firm level which are likely to influence the firm's HRM approach (Gooderham et al, 1999;Fenton-O'Creevy et al, 2008). These are firm size, industry, ownership and union density.…”

Global organizations and supply chain

“…Terminology varies across literature. Terms included were standardization, centralization, integration, assimilation or convergence versus adaptation, autonomy, separation, novelty or divergence (Lu and Bjorkman, 1997;McGaughey and De Cieri, 1999;Fenton-O'Creevy et al, 2007). Yet, virtually all the terms refer to the same phenomenon: the need to balance global HRM practices for the sake of efficiency and the adaptation to the local context.…”

HRM and IR in Multinational Corporations: Uneasy Bedfellows?

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